12/17/2005

Economic Patriotism

"To the economic patriots of the Old Republic, trade policy was designed to benefit the American worker first. They wanted American families to have the highest standard of living on earth and U.S. industry to be superior to that of any and all nations. If this meant favoring American manufacturers with privileged access to U.S. markets and keeping foreign goods out with high tariffs, so be it...

The Davos generation of leaders puts the Global Economy first. They are all good internationalists. If it’s good for the Global Economy, it must be good for America. Theirs is a quasi-religious faith in that same free-trade ideology for which Hamilton, Clay, Lincoln, and TR had only spitting contempt...

That U.S. manufacturing that once employed a third of our labor force now employs perhaps 10 percent does not matter. That the most self-sufficient nation in history that produced 96 percent of all that it consumed now depends on foreigners for a fourth of its steel, half its autos and machine tools, two-thirds of its textiles and apparel, most of its cameras, bicycles, motorcycles, shoes, TVs, videotape machines, radios, etc., does not matter.

That tens of thousands of foreign workers are brought in each year by U.S. employers to take high-tech jobs, that U.S. factories are shut down daily here while opening in China, that professional work is being outsourced to India, that we borrow $2 billion a day to finance consumption of foreign goods—none of this matters. The nation does not matter. The country does not matter. For we are all now in a Global Economy.

And so, as the jobs and skills of U.S. manufacturing workers disappear and the taxes they pay into Social Security, Medicare, and federal and state governments fall, and the cost of their pensions is passed on to taxpayers, and the government goes deeper into debt to cover rising social costs corporations used to carry, other countries quietly observe.

Fifty years ago, a trade deficit of 6 percent of GDP, a hemorrhaging of manufacturing jobs, a growing dependence on foreign nations for the vital necessities of our national life, would have been taken as signs of the decline and fall of a great nation.

Our elites tell us that we have simply not read Thomas Friedman, we do not understand that the old Hobbesian world is history, that we have entered a new era of interdependence where democracy and free markets will flourish and usher us all into a golden age—and we Americans will lead the way.

If they are right, we are Cassandras. If they are wrong, they are fools who sold out the greatest country in all history for a mess of pottage"
""I have formed the view that if ever there was a country made for globalisation, it is Britain. It is in our DNA...You have nothing to fear if you skill yourself"
Digby Jones, Chairman of the Confederation of British Industry
"Middle England is under threat"
Rick Simmonds, ALS Consulting
"Somewhere in Vietnam there is a girl who is working in the fields because her parents cannot afford to send her to school...she is a victim of protective tariffs."
Daniel Griswold, the Cato Institute.
Griswold falls into the trap laid at the feet of all globalists; if a sovereign state doesn't want to import Vietnamese rice, putting its own workforce at risk, there is absolutely nothing in the rulebook that says it has to.
The whole object of free trade is to ensure that nations, without which there are no such things as economies, are able to import those things which they cannot produce themselves whether by reason of climate or culture. Seen any new jet designs from the United Arab Emirates recently? Although the price of resources means its rulers will soon be able to own Boeing, the UAE's cultural bankruptcy means it is unable to produce anything of utility or consequence. Whatever they have is obtained from what they get from the ground, and they rely on foreigners to do it.
What we have now is not 'free trade' in the classical sense, but what Paul Craig Roberts has labelled 'export substutution'. It is perfectly possible for the UK to produce everything that it consumes; however, 26 years ago we elected a Prime Minister whose guiding economic principle was that cheapest is best, an unfortunate state of mind common in those raised in small business backgrounds. Cheapest is not always best; mostly cheapest is never best, because the corners cut in order to make things cheap mean that they wear out faster, and the replacement costs cancel out the initial putative saving.
This principle led to the deliberate destruction of the UK's coal sector, which, as my fellow blogger The Devil's Kitchen obliquely referred to yesterday, may have been a great miscalculation. I may be a pretty archaic kind of conservative, but even I have qualms about going back to candlelight.
Baroness Thatcher gave us 'free markets'; but markets are never free. If lunch is never free, why should anyone thinks markets are ever free either? The success of markets is entirely dependent on the probity of the individual people operating within them; which makes all the more puzzling the universal silence on the suspicious spikes in the wholesale price of gas in October 2003 which have led to the current crisis in supply.
She gave us privatisation, which is to handling stolen goods by the state what nationalisation is to theft by the state. Her ideology was that business should not be controlled by the state; which makes all the more puzzling the purchase of Orange by France Telecom. That the British consumer be required to subsidise a company owned by the British government is anathema to Thatcherite dogma; but it seems OK that they subsidise one controlled by the French goverment. Go figure.
I get it! Orange was sold by private investors seeking the best return - and if they want to lift money out of the French taxpayer's pocket, then that's all right by us!
Well, no. If successive British governments are determined to rule a nation of greedy ideologues they should at least attempt to lever a measure of intellectual honesty into the process.
Earlier this week Jeff Randall of the The Daily Telegraph wrote a paean of praise to Sir Terry Leahy of Tesco, entitled 'Unravelling the conundrum: how Leahy won the prizes'. The usually astute Randall wrote that the company's success had been down to 'spotting social trends and reacting swiftly to them'; and that, 'Tesco is on the case day and night to make sure that its goods and services are blessed by the holy trinity of desirability, affordability and availability'.
The previous week Randall's own newspaper had written that,
"A full blown investigation of the sector by the Competition Commission next year looks a racing certainty as further evidence emerges that the big grocers are using their enormous power to squeeze the life out of their suppliers.

The latest allegation is that companies like Tesco and Asda are stretching their payment terms to such an extent that they are in effect receiving free finance from already hard pressed suppliers.

The claim is not new, but the extent and growth of the pain down the supply chain is becoming hard to ignore. The amount of money owed to suppliers by Tesco, for example, has grown by £2.2billion over the past five years.

Only £700m of that is accounted for by extra stocks, which means the company is effectively using £1.5billion of its suppliers' money to spend as it pleases"
I'm quite sure that Tesco's audits present perfectly true and fair statements of the company's assets and liabilities, and conform to all accounting standards; but the fact remains that its extraordinary profits are bolsterered by payments withheld from suppliers, money which belongs to other people. Hopefully this knowledge keeps its auditors awake at night.
Brian Barder wrote an outstanding post earlier this week entitled 'Inequality, opportunity and meritocracy'. I don't agree with the good knight about much, but he was right on the money when charting the gap between rich and poor, a consequence of all such 'free markets', which seems to be nothing more than a vehicle for effecting wealth transfers from the rich to the poor, not from the poor to the rich.
He quoted George Monbiot, who had written of the CBI that,
"In the submission it made to the chancellor's pre-budget report, it demanded that the government spend less on everything except business. The state should cut its planned spending on health, social security and local authorities, and use some of the savings to protect and enhance its "support and advisory services for trade and businesses". Our higher-education budget should be used to supply free research for corporations. The regional development agencies should "expand their activities to support more extensive business-to-business networking and collaboration". Further road taxes should be abandoned, and the climate-change levy "should be frozen", but the government should help businesses by building more roads and airports. This is what the CBI means by free enterprise".
Indeed. A powerful case can now be made that the origins of the outsourcing phenomenon can now be charted back to the '80's, with the Thatcher government's unconscious outsourcing of the UK's entire trade policy. Businesses were left to do as they wished; so they did what was best for them, a perfectly natural thing for them to do, and not for the good of all citizens, as governments are at least supposed to do. It was at this time that the words 'competitiveness' and 'productivity' began to filter into my consciousness, as if my fellow citizens were somehow bad, unworthy, because the society in which they lived had high living standards demanding higher wages than might be payable in more backward places.
And no government ever complains about how uncompetitive British workers are when it's banking the tax money.
As the competing ideology of Communism fell, so the globalisation and free-market philosophies spread, impoverishing the country of Russia and effecting wealth transfers to individuals of the kind which the members of the CBI can only dream of.
New kinds of businesses sprang up - call centres, hedge funds, junk bond traders, recruitment consultants by the barrel-load, compensation consultancies and outsourcers; all of them services, all of them chasing smaller and smaller pots of money and none of them actually producing anything, apart from spreadsheets for the service delivery managers to pore over and assess our 'productivity'.
The CBI became a bunch of raving welfare queens, like the worst kind of welfare queen from Drumchapel. There is a popular myth that the size of government is reduced if its functions are hived off to outsourcers - that is not the case. The function is merely performed elsewhere; and any business which relies upon the taxpayer for its revenues is not a business - it's government for profit.
Over the past 20 years, British trade and economic policy have been performed for the benefit of businesses and other countries - not for our own country or its people. We are mostly poorer in real terms than we were - there is more stuff available for us to buy, but we buy on credit instead of with money with real value, largely borrowed against the artificially high value of other assets such as housing. That the price of housing should be so high shows how widespread lack of confidence in Britain's economic performance really is - and until we have a genuinely patriotic economic policy, putting Britain and the British people first, it's going to be more of the same.

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